The article exploits the regional variation in the unexpected (or forced) inflow of Syrian refugees as a natural experiment to estimate the impact of immigration on consumer prices in Turkey. Using a difference-in-differences strategy and a comprehensive data set on the regional prices of CPI items, the authors find that general level of consumer prices has declined by approximately 2.5 % due to immigration. Prices of goods and services have declined in similar magnitudes. The authors highlight that the channel through which the price declines take place is the informal labor market. Syrian refugees supply inexpensive informal labor and, thus, substitute the informal native workers especially in informal-labor intensive sectors. The authors document that prices in these sectors have fallen by around 4 %, while the prices in the formal labor-intensive sectors have almost remained unchanged. Increase in the supply of informal immigrant workers generates labor cost advantages and keeps prices lower in the informal labor-intensive sectors.

Binnur Balkan is a first year PhD student at Stockholm School of Economics (SSE).

Semih Tumen is an Economist and Director General at the Structural Economic Research Department at the Central Bank of the Republic of Turkey.